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At first, it sounds like another startup fairytale. A 19-year-old Princeton freshman starts a company with the hopes of making a tangible difference in the world, and it grows into a global, multi-million dollar venture.But stories like TerraCycle founder and CEO Tom Szaky’s are never as they seem.
Click here for a photo tour of TerraCycle’s Incredible 99% Recycled Office >
It takes more than just a genius idea to succeed. Businesses that are looking to make a transformational global impact require hard work, incredible business savvy and the courage to press on when everyone calls you crazy.
TerraCycle began as a sustainable fertiliser company, making the product out of worm refuse and putting it in used bottles. It even got a licence to use Coca-Cola bottles (which have a patented contour shape).
Now, TerraCycle’s business model has totally changed, and it’s making a bigger impact than ever. It’s based around ‘upcycling,’ or the repurposing of waste materials as something else. For example, Capri Sun pouches can be remade into a tote bag.
And it’s working. The company has made it into the top 1000 in Inc Magazine’s annual Inc 5000 list of fastest growing privately-owned companies for three consecutive years, and even had its own 4-episode mini-series on National Geographic Channel in 2009 called Garbage Moguls.
So how did Szaky do it? We caught up with the ‘eco-capitalist’ to find out:
What was the inspiration behind TerraCycle? How did you get started?
TerraCycle was inspired by one of my friends in Canada who discovered that using worm poop helped a particular plant grow fast and healthy. In order to enter business plan competitions at my university I created the model for TerraCycle. I realised that using organic waste — which potentially has zero or even negative costs — as a raw material to create products could be a profitable and responsible business model. I saved, borrowed and begged to raise $20,000 to create a Worm Gin to house my worms and convince my school’s cafeteria service to give me their waste. Four months later I had dropped out to dedicate myself full time to TerraCycle.
What were your biggest struggles in the early going?
The earliest struggle was getting investors on board with this unheard of kind of wacky business plan. People aren’t generally willing to put their money into something for which there isn’t any proven history at all. Here’s a 19-year old kid trying to get you to invest in a product that is liquefied worm poop in a used soda bottle. I mean, I had people laugh at me when I went to pitch them.
Later on, the challenge was getting major retailers to take a chance on an unknown, outlandish product — the worm poop fertiliser. I had no retail history, no client base, no one had ever heard of TerraCycle. I knew that trying to build slowly, garden centre at a time would never work. I mean I had to eat. So I went right to the top, to The Home Depot and Walmart, the world’s largest retailers. Of course everyone told me I was crazy and they would never buy it.
What prompted the drastic change in your business model?
The drastic change was prompted in large part by opportunity. The environmental and fiscal implications for expanding our trash collections and products were massive. We realised that fertiliser was only a tiny fraction of where we could have the impact, and we had to go for something bigger.
We started running [collection] programs for brands like Honest Tea, CLIF BAR and Stonyfield Farm. Within a year we were working with Kraft Foods brands like Capri Sun and Nabisco, with Frito-Lay and with Mars. It was clear our new model was ripe with opportunity.
[From its website: The TerraCycle Drink Pouch Brigade program allows almost any school, non-profit organisation or individual to save drink pouches from taking up space in landfills.]
TerraCycle has developed a vast network of people through your Brigade collection programs. How did you gain all of those loyal followers, and how do you plan to keep them?
TerraCycle has never paid for an advertisement. We do not advertise or sponsor and spend almost nothing on marketing. We rely entirely on PR, social media, grassroots and guerrilla marketing and of course word-of-mouth to grow our network of collectors. Also we’ve gained many of those followers by default — they want to recycle as much as they can, and we give them that opportunity. We also make it as easy as possible — they can ship everything for free, in whatever box they want — and we donate money to charity for them.
We plan on keeping them by expanding recycling opportunities, keeping the program simple and of course free, and eventually allowing them to send in all types of trash together, so co-mingled versus single stream.
How would you describe TerraCycle’s corporate culture, and how does your unique office reflect it?
TerraCycle’s corporate culture is fairly relaxed, we try to keep it fun in order to make it easier to work long hours and deal with many challenges. Of course we expect employees to be professional, show up on time, and so on and so forth, but we also recognise that people do their best work when they are comfortable and relaxed, so we foster a social atmosphere where everyone can enjoy themselves.
You’ll see Nerf guns lying around our office, a mini-golf course, a “fun calendar,” and graffiti on the walls. Taking a 20 minute break for a round of mini-golf helps employees connect, and working around graffiti, upcycled tables, artwork, and all kinds of neat decorations helps foster the creative thinking. We also don’t have a required dress code beyond, “appropriate.”
How have you managed your company’s culture over the years of growth? Has the creativity level remained throughout?
Keeping culture the same when growing from a two man operation in a dorm room to a global company is a massive challenge. TerraCycle accomplishes this in several ways: a colourful, bright, creative office space made from garbage, by hiring young, passionate, energetic employees, by encouraging social interaction between employees with monthly parties and weekly rock climbing (as well as other activities), and arming employees with Nerf guns. Creativity is demanded by the industry and the challenges we’re taking on, and in order to deal with unknown obstacles and questions, we need the creativity this office culture encourages.
All that said, the culture has definitely changed since the early days. I think that is unavoidable as a company grows to a certain scale.
What sort of people do you try to surround yourself with?
I try to surround myself with people who have the same energy and passion as I do, mostly because it’s encouraging as I do my own work. People who engage in positive thinking and push themselves will be the most successful, and it’s helpful to surround yourself with such driven people.
Have people (inside or outside the company) ever doubted you because of your youth? How do you deal with them?
When I was younger, part of the challenge of having this crazy, unheard of idea taken seriously was that I was also young. When people wanted to tweak my idea, I either insisted on keeping my plan for an eco-friendly company, or I went and followed my own path. It worked, and now that I have more experience under my belt and credibility, it’s not so much a problem.
Bottom line: sometimes the youth has been a disadvantage and other times a massive advantage. Certainly you catch and capture people’s attention, but it can also cause people to doubt your ability to execute.
Do you think your business model could work for other companies? What can they learn from you?
The TerraCycle business model is very unique in that collecting and repurposing material like ours had never been addressed before. However, we’ve always remained flexible with our business model, goals, mission, and how we create products. We’ve moved from a manufacturing model to a licensing model, which has helped make TerraCycle profitable. I think that that flexibility is key for any young business to succeed. They can’t be afraid to change and adjust.
What’s TerraCycle’s biggest threat?
Internally, TerraCycle’s biggest threat is our own success. We’re moving and growing so quickly both horizontally and vertically that there’s always the threat of stretching our resources too thin. We insure that doesn’t happen by creating more structure and bringing in talented dedicated employees.
Externally, we need to consider the possibility that the green movement and people’s concerns over the planet could slow or disappear altogether. Green is a trend right now, and people care about sustainability; whether this is a passing phase or will become a standard has yet to be seen.
What’s the next big step for TerraCycle?
We’ve been expanding internationally through Europe and the Americas, and we’re hoping to make the jump to the Pacific Rim in the next year or so. In addition to expanding our outreach, we’re always working on expanding the scope of what we can collect, challenging ourselves with new waste streams that no one else would ever consider working with, such as cigarette butts and dirty diapers.
Later this year, we’re looking forward to introducing our 360-degree waste reduction systems for households for which the three options are TerraCycle: Unsponsored Brigades, TerraCycle: Home, and TerraCycle: On the Go. These models are programs that consumers have to pay for, but are a way that people can bring household waste to zero.